CHART OF THE DAY: You don't need $1 million to retire

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Much has been written about the need for around $1 million in superannuation to be able to fund a comfortable retirement with income of around $58,000 a year.

Anything less, we are told, risks a life on just the basics with little opportunity for travel or small luxuries.

Analysis by the Australian Institute of Superannuation Trustees busts what it calls the $1 million retirement myth.

The key piece forgotten when calculating a comfortable retirement is that more and more Australians will retire receiving a part aged pension to go with their superannuation savings.

If you have no hope of building a $1 million next egg, the key message is: Don’t despair. It’s not as bad as it looks and you are not alone.

This chart shows how the two income streams — pension and super — combine to make up a comfortable living standard for a couple with $450,000 in superannuation:

That $450,000 delivers more than $50,000 a year including a part pension.

A part pension also has the advantage of not fluctuating when the market goes up and down as happens with a super fund. The pension is fixed with regular increases.

Even a small amount of super can make a big difference. A balance of $150,000 delivers a weekly income of $163 to be added to the age pension for a single person, a 38% increase in retirement income.

The median superannuation balance for Australians approaching retirement is currently around $100,000 because older workers haven’t had the full benefit of statutory super savings for their entire working life.

Retirees with super balances of $100,000 will get a retirement income 25% more than the full pension for a single person, or an extra $110 a week.

The full pension including supplements is about $22,500 for an individual and $33,500 for a couple. To replace this income would require, according to the Australian Institute of Superannuation Trustees, about $390,000 in assets for an individual or around $590,000 for a couple.

“With much of the focus of superannuation commentators on whether $1 million or $2 million should be the right target, there is little consideration of what workers approaching retirement with average balances can expect,” says the the Australian Institute of Superannuation Trustees.

“Workers with $50,000 or $100,000 might easily despair reading the ‘Money’ pages of major newspapers, but in fact their super balance gives them options they would not otherwise have, and modest additional savings will make a significant difference to weekly budgets.”

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